Alexandra Vinogradova

Growth and Mitigation Policies With Uncertain Climate Damage

Climate physics predicts that the intensity of natural disasters will increase in the future due to climate change. One of the biggest challenges for economic modeling is the inherent uncertainty of climate events, which crucially affects consumption, investment, and abatement decisions. We present a stochastic model of a growing economy where natural disasters are multiple and random, with damages driven by the economys polluting activity. We provide a closed-form solution and show that the optimal path is characterized by a constant growth rate of consumption and the capital stock until a shock arrives, triggering a downward jump in both variables. Optimum mitigation policy consists of spending a constant fraction of output on emissions abatement. This fraction is an increasing function of the arrival rate, polluting intensity of output, and the damage intensity of emissions. A sharp response of the optimum growth rate and the abatement share to changes in the arrival rate and the damage intensity justifies more stringent climate policies as compared to the expectation-based scenario. We subsequently extend the baseline model by adding climate-induced fluctuations around the growth trend and stock-pollution effects, demonstrating robustness of our results. In a quantitative assessment of our model we show that the optimal abatement expenditure at the global level may represent 0.9% of output, which is equivalent to a tax of

Immigration Policies and the Choice between Documented and Undocumented Migration

71 per ton carbon.

Dynamic Behavior of Oil Importers and Exporters Under Uncertainty

What determines whether a temporary migrant chooses to go abroad as a documented worker or as an illegal alien? We address the question from a theoretical perspective by focusing on how immigration policies, aimed at both documented and undocumented foreign workers, influence the choice between the two modes of migration. Calibrating our model to the specific case of temporary emigration from Thailand, we provide estimates of the relative policy effectiveness. The deportation rate facing undocumented aliens is shown to be the most potent instrument, while some of the measures directed at documented contract workers are found to be more effective in influencing the choice of emigration mode than border controls and employer sanctions aimed at illegal immigrants.

Undocumented migrants in debt

We consider long-run incentives for oil-importing and -exporting countries when the arrival of a backstop technology is uncertain. Oil importers invest in research and development to avoid their dependence on foreign oil; the arrival of the oil substitute is modeled with a Poisson process. The optimum resource extraction path is determined by the optimization of oil exporters, which take the Poisson rate as exogenously given. We provide clear-cut solutions of the optimization plans for both types of countries. We find that the optimal consumption rate of oil importers may be either constant or falling during substitute development; it is a decreasing function of the oil price. When the substitute arrives, the rate of resource depletion jumps down and the depletion pace during the post R&D phase is slower than during the R&D phase, provided that the Poisson arrival rate is sufficiently large. We also show under which conditions there is never strategic behavior and when strategic behavior may take place.